Broker tips: Wolseley, Tesco, M&S

4th Oct 2011 12:28

Even though Wolseley resumed its final dividend on Tuesday, Prime Markets said that the group's exposure to global economic growth along with its substantial debt pile may mean that the shareholder payout "may have to go again"."As a barometer for the UK consumer, fewer companies are better placed or are able to more accurately reflect the state of the domestic and global economy than building materials group Wolseley," said Prime Markets' head of dealing Richard Curr."Just as Wolseley's star appears to be in its ascendancy once again, the CEO has pointed to trouble on the horizon due to the weakening economic forecasts, and with a big, albeit shrinking debt pile, the company is heavily exposed to any downturn."The broker recommends to sell and gives the stock a target price of 1,426p.Shares in Tesco bucked the downward trend on Tuesday after UBS upgraded the supermarket titan from neutral to buy and added the stock to its 'Key Calls' list, highlighting that "driving higher returns is now at the heart of group strategy.""A range of earnings, asset and dividend valuation models suggest Tesco shares represent a material pricing anomaly at the current level."The target price is hiked from 410p to 510p.Seymour Pierce has cut its target price for high street retail giant Marks & Spencer (M&S) from 395p to 360p, saying that it "does not see significant upside in earnings over the next two years as the company refurbishes its UK-based outlets and changes its marketing focus."Seymour Pierce notes that M&S has asked supplier for a one-off contribution of 1.25% of apparel and homewares turnover in the year to August, which suggests that trading has been tough in the second quarter "and that the company has a cost-conscious finance director".Nevertheless, a buy recommendation is kept.BC